Most of the employed person would be very much aware of the term “TDS”, as they have been paying taxes on their income through this route. TDS rates are subject to change every few financial years. Though it happens not so often. But in today’s world of dynamic economy, it has become more prone to change. So, you must be aware of these changing rates, so that you know how much of taxes you are paying. In this article, we will be discussing about TDS rates for FY 2017-18.

Before proceeding further, you must know what TDS is.

What is TDS?

  • TDS stands for Tax Deduction at Source. An employer before paying salary to the employee, has the responsibility of deducting taxes from his salary and then deposit the same with the government on behalf of that employee. As the taxes are collected at source, it is also known as TDS in short.
  • Individuals as well as businesses are required to pay taxes under this facility.

TDS percentage: –

  • TDS percentage or rates are not same for every person. It differs according to the nature or types of the employment of the taxpayers or his source of income.

Types of income on which TDS is applicable: –

TDS is collected by the deductor on various types of income such as on –

  • salary
  • rent
  • sale of property
  • brokerage or commission
  • Contractor
  • Professional or technical services
  • Royalty
  • Non compete fee
  • Deemed Dividends
  • Interest payments etc.

One by one, we will be discussing about the TDS rates for FY 2017-18 applicable in each case.

TDS rates on Salary: –

Salaried persons are more familiar with this term TDS, as they constitute a large number of taxpayers. Here, the employer has to deduct taxes from the income payable to the employee or taxpayer on an annual basis and on behalf of him deposit the same with the government. TDS percentage on salary varies with the age group of salaried persons as well as income brackets. In the chart below, you can see all TDS rates and other cesses for every salaried person who falls under their respective categories.

Note: – TDS rates are deducted along with other surcharges and cesses wherever applicable.

TDS Rates for Financial Year 2017-18 on salary: –

  • For Individuals below 60 years of age: –

Annual Income TDS Rates Secondary and Higher Education cess Education cess
Below Rs 2,50,000 Nil Nil Nil
Rs 2,50,001 – Rs 5,00,000 10% 1% of TDS 2% of TDS
Rs 5,00,001 – Rs 10,00,000 Rs 12,500 + 20% 1% of TDS 2% of TDS
Above Rs 10,00,000 Rs 1,12,500 + 30% 1% of TDS 2% of TDS
  • For Individuals between the age group of 60 and 80 years: –

Annual Income TDS percentage Secondary and Higher Education Cess Education Cess
Below Rs 3,00,000 Nil Nil Nil
Rs 3,00,001 – Rs 5,00,000 5% 1% of TDS 2% of TDS
Rs 5,00,001 – Rs 10,00,000 Rs 10,000 + 20% 1% of TDS 2% of TDS
Above Rs 10,00,000 Rs 1,10,000 + 30% 1% of TDS 2% of TDS
  • For Individuals above 80 years of age: –

Annual Income TDS percentage Secondary and Higher Education Cess Education Cess
Below Rs 5,00,000 Nil Nil Nil
Rs 5,00,001 – Rs 10,00,000 20% 1% of TDS 2% of TDS
Above Rs 10,00,000 Rs 1,00,000 + 30% 1% of TDS 2% of TDS

Calculation of TDS on salary: –

  • TDS on salary is calculated by taking into account the total salary of the employee on an annual basis including the earning of bonuses if applicable.
  • Section 10, Section 80C and section 80D of Income Tax Act, 1961, provides exemption for individuals or employees from paying taxes on some allowances, investments and other incomes such as house rent allowances, travel or conveyance allowance, medical allowance, any investments up to amount Rs 1,50,000 etc.
  • The individuals or employees has to submit the exemption certificate acquired from the assessing officer to his employer or deductor.
  • It’s the responsibility of the deductor to subtract exempted income from the total income while calculating.
  • After subtracting the exempted income from the total income of a month, rest amount should be multiplied by 12 and this way total taxable income can be derived.
  • From the total taxable income, taxes should be deducted at the rate fixed by the Income Tax Act.

Investments that are exempted from TDS: –

Income Tax Act,1961, under section 80C also provides for exemption when individuals or Hindu Undivided Family make investments that is within the limit of amount Rs 1,50,000. Such as –

  • Public Provident Fund
  • Home Loan Repayment
  • Life Insurance Premiums
  • Mutual Funds
  • Bonds like National Savings Certificates
  • Equity-linked Savings Schemes
  • Sukanya Samriddhi Account

TDS on Rent: –

  • As per section 194(I) of the Income Tax Act,1961, when tax is deducted by tenant on paying rent to the landlord/landowner/payee/etc, that is known as TDS on rent.
  • Individuals and HUF (Hindu Undivided Family) are exempted from deducting taxes. Only if they come under the purview of tax audit section 44A, they can deduct TDS on rent.
  • If the total rent payable to the tenant does not exceed the amount of Rs 1,80,000, then he is not liable for any tax deduction.
  • TDS percentages are different for different items that can be put on rent such as for land, building or apartments, rate of applicable TDS is different than that on heavy machinery or equipment.

TDS rates for FY 2017-18 on rent: –

Items TDS Rates Surcharges/Cess
Land, Building, Flats, Apartments, etc 10% Nil
Heavy Machinery, Equipments, etc 2% Nil

Note: – If PAN number is not provided by the tenant then TDS on rent will be deducted at the rate of 20%.

TDS on Sale of Property: –

  • According to the section 194 IA of Income Tax Act, 1961, any person who is buying any immovable property will deduct taxes at the time of making payment to the seller of the property. This section is in effect from the date June 1, 2013.
  • The buyer of the property has the responsibility of deducting taxes from the sale consideration at the time of making payment to the seller.
  • For the purpose of taxation, there is a limit on the total consideration on the sale of the property i.e. if the total consideration does not exceed the amount of Rs 50,00,000, TDS on sale of property is exempted according to sec 194 IA.

TDS rates on FY 2017-18 on sale of property: –

  • TDS rates on sale of property is uniform for every kind of property.
  • It is fixed at the rate of 1%.
  • No surcharges or cess is charged over the top of TDS.
  • Non-furnishing of PAN number by both seller and buyer will amount to increase in rate of TDS i.e. 20%.

TDS on Brokerage or Commission: –

  • According to section 194H of the Income Tax Act, 1961, Commission or Brokerage means payment received or receivable, by a person who is charging it in exchange of any services rendered with the exclusion of any professional services (as notified by the board under section 44AA).
  • It includes any other services which includes buying or selling of goods, valuable articles, assets or any other things.
  • Selling and buying of Securities and other professional services are not included in it.
  • TDS has to be deducted by the company or person, on or at the time of payment of any income to the payee in exchange for his services.
  • Services rendered by the payee should be in the capacity of a broker or agent and the payment should be a commission or brokerage.
  • Here, deductor does not include an individual or Hindu Undivided Family.

TDS rates for FY 2017-18 on Brokerage or Commission: –

  • Here again, TDS is uniform irrespective of the nature of brokerage.
  • The rate for which is fixed at 5%.
  • No surcharge or cess is applicable.
  • Non-furnishing of PAN by the broker or taxpayer will make the rate of TDS to increase to 20%.

TDS on Contractor: –

  • A person or a group of persons who carry out any work or services or supply of labour for carrying out any work on behalf of any client under a contract are called as contractors.
  • When the contractors award any work or services or supply of labour to someone else, then those people are called as Sub-contractors.
  • Any contractor who carry out work or services for a single fee of amount which is less than Rs 30, 000.
  • In relation to the same deductor, if the total amount of payment to the contractor for his work/services does not exceed to Rs 1, 00, 000.
  • If the total income of any contractor from every source does not exceed the exempted limit of taxable income of Rs 2, 50, 000.
  • Rates of TDS varies from one contractor to another sub-contractor.
  • From the financial year 2017-18, this rate has been revised. Check the below table to see them.

TDS rates for FY 2017-18 on contractor payments: –

Types TDS Rates Surcharges/Cess
Individual/HUF 1% Nil
Other Contractors 2% Nil
Sub-Contractors 1% Nil

Notes: – When PAN number is not provided by the payee, TDS will be deducted at the rate of 20%.

TDS on Professional or Technical Fees: –

  • A person, not being an individual or Hindu Undivided Family, avail the services of professional or technical experts or pay a royalty to any entity, has to deduct TDS at the time of making payment to them, according to section 194J of the Income Tax Act, 1961.
  • Here, professional services also include technical services as mentioned in the above points and Non-compete fee as per the section 28VA of Income Tax Act.
  • Under the section 194J of Income Tax Act, from the date of 1st July 2012, any fees, commission or remuneration paid to the director of any company also comes under it’s jurisdiction and will be liable for the deduction of TDS. Earlier they were counted as their head salary.
  • BPOs (Business Processing Organisations) are also included under this section. They are also required to pay TDS over their Professional fees. Though rate of TDS varies from other professional or technical fees.

TDS rates for FY 2017-18 on professional fees: –

Types TDS Rates Surcharge/Cess
Professional/Technical fees 10% Nil
Royalty 10% Nil
Non-compete fee 10% Nil
For BPOs 2% Nil

Notes: – Non-furnishing of PAN number by the payee will render him to pay TDS at the rate of 20%.

TDS on Deemed Dividends: –

  • When a foreign company pays it’s shareholders loans or advance who enjoys 10% voting power in the same company, then that money is known as Deemed Dividends.
  • Shareholders of domestic companies don’t have to pay TDS on any deemed dividends.

TDS rate on Deemed dividends: –

  • The TDS rate for FY 2017-18 is fixed at 10%.
  • No surcharges or cess is applicable.

TDS on Interest Payments: –

  • Every person or entity has to deduct TDS on interest payment to every of it’s customers except individuals or Hindu Undivided Family.
  • In case the individual is a professional and his total sales turnover has exceeded Rs 25 lakhs in previous financial year, then interest paid against his deposits will be liable for TDS deduction.
  • For others, if their total sales consideration has exceeded Rs 1 crore in previous financial year, then any interest paid to them against their deposits will be liable for TDS deduction.

TDS rates for FY 2017-18 on Interest payments: –

  • In these cases, rate of TDS at 10% is applicable.
  • No surcharges or cess is applicable.
  • Non-furnishing of PAN will render the TDS percentages to increase to 20%.

 

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